Ice cream sales in jeopardy due to VAT charge

Tuesday 12 April 2011 - Editorial Assistant

Representatives of the UK ice cream industry have today called for the chilled dairy food to be made exempt from VAT charges, due to costs spiralling at the start of this year.

VAT is not put on the price of most foods and drinks but ice cream is currently classified as a luxury product, and The Ice Cream Alliance (ICA) has warned that many ice cream sellers could go out of business if the 20 per cent rate remains.

It is not just local ice cream vans which are being affected however, as soaring commodity prices put pressure on manufacturers and major retailers alike.

Zelica Carr, CEO of ICA, said: “The ice cream industry plays a major part in the economy of the UK with sales of around £1.3 billion a year but many businesses are fearing for their future after being hit by a succession of swingeing price increases.

“I have written to Chancellor Mr Osborne asking him to reconsider the classification of ice cream as a luxury product and re-classify it as a food and reduce the VAT levied on it to zero.”

According to the ICA, since January the price of sugar has risen from £460 to £800 a ton, skimmed milk powder has more than doubled to £2,900 per ton and cocoa powder virtually trebled from £1,250 per ton to £3,600.

Carr added: “Ice cream plays an important, if often under appreciated, role in British life. It provides an affordable feel good factor which in today’s economic climate is sadly lacking for many families.”

Zelica Carr, CEO of The Ice Cream Alliance, with her letter to The Chancellor

Wholesaler Palmer & Harvey is attempting to help out the retailers in its network to maximise ice cream sales, in a new initiative called ‘We’ve got it licked’.

Its category management advice programme explains to retailers, amongst other things, how to choose which ice creams to stock, where to sell them in store and how to advertise them.

Richard Hayhoe, Marketing Director at Palmer and Harvey, said: “The ice cream market is in growth - value sales have increased by 2.3 per cent year-on-year, with sales of £108 million in the hand-held impulse category in 2010 alone.

“Our ice cream information pack for our independent retailers will help them maximise their sales.”

Recent hot weather will have further increased the demand for the chilled treats, but with family budgets so squeezed at present the ICA, retailers and consumers will hope that the government reassesses the ice creams tax classification.